Is Overtime Taxed in Texas? 2026 Guide for Workers

Is Overtime Taxed in Texas? Short Answer

Yes — overtime pay is taxed in Texas, but only at the federal level. Texas has no state income tax, so every overtime dollar is subject to just three withholdings: federal income tax, Social Security (6.2%), and Medicare (1.45%). There is no "overtime tax rate" — your time-and-a-half wages are taxed at the same federal rates as your regular wages.

If your overtime check looked smaller than expected, it's almost always because of how the IRS annualizes withholding on bigger paychecks, not because Texas or the federal government taxes overtime differently.

> Want the math done for you? Try our Texas Overtime Pay Calculator — it applies FLSA's 40-hour weekly rule automatically.

How Overtime Pay Works in Texas (Quick Refresher)

Texas follows the federal FLSA with no state add-ons. Non-exempt employees earn:

• 1.5× regular rate for hours worked over 40 in a workweek.
• No daily overtime — working 12 hours in a single day does not trigger OT unless your weekly total exceeds 40.
• No double-time required by Texas or federal law (only if your employer or union contract promises it).

All of those premium dollars are wages, fully reportable as W-2 income.

The Three Taxes Withheld from Texas Overtime in 2026

1. Federal Income Tax

Federal income tax is progressive: the more you earn in a pay period, the higher the marginal withholding rate. Employers use IRS Publication 15-T tables, which annualize each paycheck — assuming you'll earn that much every period. A big overtime week can briefly push a paycheck into a higher withholding bracket, even if your real annual bracket is lower. Any over-withholding is refunded when you file your 1040.

2. Social Security Tax (FICA)

• Rate: 6.2% of gross wages
• 2026 wage base limit: $176,100 (per the Social Security Administration)

Once your year-to-date wages cross the wage base, Social Security stops being withheld. For most Texas workers, OT is fully taxed at 6.2% all year.

3. Medicare Tax (FICA)

• Rate: 1.45% of all wages (no wage cap)
• Additional Medicare Tax: extra 0.9% on wages over $200,000/year (single) or $250,000 (married filing jointly)

Combined employee FICA is 7.65% on every overtime dollar in Texas.

What Texas Does NOT Withhold

• No state income tax (Texas Constitution Art. VIII, §24)
• No state disability insurance (unlike California's SDI)
• No local payroll taxes for almost all Texas cities

This is why Texas overtime checks generally take home more than equivalent OT in California, New York, or Oregon.

Worked Example: Overtime Take-Home Pay in Texas (2026)

Let's say Carlos, a Houston warehouse worker, earns $25/hour and works 50 hours in one week (10 hours of weekly overtime).

| Item | Calculation | Amount |

|------|-------------|--------|

| Regular pay | 40 × $25 | $1,000.00 |

| Overtime pay | 10 × ($25 × 1.5) | $375.00 |

| Gross wages | | $1,375.00 |

| Federal income tax (≈12% effective on this check) | | −$165.00 |

| Social Security (6.2%) | | −$85.25 |

| Medicare (1.45%) | | −$19.94 |

| Estimated net pay | | ≈ $1,104.81 |

Carlos's 10 hours of overtime added $375 gross but about $303 net after federal taxes — roughly a 19% combined effective rate on his OT. Compare that to California's ~25% on the same paycheck: Texas keeps roughly $21 more per OT day for the average worker, just by skipping state income tax and SDI.

Why Does My Texas Overtime Paycheck Feel Like It's Taxed More?

Three things make OT feel over-taxed even in a no-state-tax state:

• . Annualization of withholding. Payroll software assumes you'll earn that much every pay period and withholds at the resulting (higher) annualized bracket. The IRS refunds the excess at tax time.
• . Bracket creep within the check. A bigger paycheck may straddle two withholding brackets, so a chunk of OT is withheld at the next-higher rate.
• . Flat FICA on top. 7.65% comes off every OT dollar before income tax — that's $28.69 of FICA alone on Carlos's $375 of OT.

None of these mean overtime is taxed at a higher rate than your regular wages.

Does the 2026 "No Tax on Overtime" Federal Deduction Apply in Texas?

Yes — and Texas workers benefit more than most. Public Law 119-21 (the federal "No Tax on Overtime Act," effective for tax years 2025–2028) created an above-the-line federal income-tax deduction of up to $12,500/year ($25,000 married filing jointly) for the premium portion of FLSA-qualifying overtime — that's the 0.5× extra in time-and-a-half pay, not the full 1.5×.

For Texas workers:

• The deduction is federal only, but Texas has no state income tax, so there's nothing extra to worry about — you get the full federal benefit with no state offset.
• The deduction does not exempt OT from FICA (Social Security/Medicare).
• Income limits apply: phase-out starts at $150,000 MAGI (single) / $300,000 (married).
• Employers still withhold normally. You claim the deduction on your 2026 federal Form 1040.

A Texas worker maxing out the $12,500 deduction in the 22% bracket saves roughly $2,750 in federal income tax for tax year 2026.

Is Overtime Taxed Differently from Regular Wages in Texas?

No. The IRS does not have a separate "overtime tax bracket." Both your regular wages and OT wages are reported in Box 1 of your W-2 as ordinary wages, taxed at the same marginal rates based on total annual income.

The only differences you may notice:

• Supplemental wage withholding. If overtime is paid on a separate check from your regular wages, employers may withhold federal tax at the flat 22% supplemental rate (IRS Publication 15).
• Higher per-check withholding because of annualization.

Both differences are about withholding mechanics, not actual tax owed.

Does Overtime Affect Other Taxes or Benefits in Texas?

Yes — extra OT income can have downstream effects:

• Health insurance subsidies (Healthcare.gov marketplace): higher annual income may reduce the Premium Tax Credit.
• Federal EITC: earning more OT can phase you out of the Earned Income Tax Credit.
• Child support and wage garnishments: generally calculated on gross wages, so OT increases deductions.
• 401(k) contributions: if your plan calculates contributions as a % of gross pay, OT increases retirement savings automatically.
• SNAP and Medicaid eligibility: higher gross income can reduce or eliminate benefits.

How to Estimate Your Texas Overtime Take-Home Pay

A quick three-step method:

• . Calculate gross OT. Hours × (regular rate × 1.5). Use our Texas Overtime Pay Calculator for accurate weekly OT.
• . Subtract 7.65% for FICA (flat, no income-tax dependency).
• . Subtract your federal marginal bracket — typically 10–22% for most Texas workers — for an approximate income-tax bite.

For Carlos above: $375 × (1 − 0.0765 − 0.12) ≈ $301 net, matching the table.

Frequently Asked Questions

Is overtime taxed at 40% in Texas?

No. There's no special 40% rate. Withholding can feel that high because of annualization and FICA stacking, but your effective federal tax rate on overtime usually lands between 15% and 28% for most Texas workers — significantly lower than in states with income tax.

Does Texas have a state income tax on overtime?

No. The Texas Constitution prohibits a personal state income tax (Art. VIII, §24). Your overtime is only subject to federal income tax and FICA.

Why does my Texas overtime check have so much tax withheld?

Withholding tables annualize each paycheck, assuming you'll earn that amount every pay period. A spike of overtime triggers a higher withholding bracket for that check. The IRS refunds the excess when you file Form 1040.

Do Texas workers benefit from the 2026 "No Tax on Overtime" deduction?

Yes — fully. Because Texas has no state income tax, there's no state offset reducing the benefit. Workers can deduct up to $12,500/year of OT premium pay from federal taxable income.

Are double-time hours taxed differently in Texas?

No. Texas and FLSA don't require double-time, but if your employer pays it, it's taxed identically to time-and-a-half — same federal rates plus FICA.

Do salaried Texas employees get taxed on overtime?

Exempt salaried employees generally don't earn overtime. Non-exempt salaried Texas employees do earn OT (calculated from a regular rate of pay) and it's taxed the same as hourly overtime.

What if my Texas employer didn't pay overtime correctly?

File a wage claim with the Texas Workforce Commission or directly with the U.S. Department of Labor Wage and Hour Division. FLSA allows recovery of unpaid OT plus an equal amount in liquidated damages, going back 2 years (3 for willful violations).

How can I reduce taxes on my Texas overtime?

Legitimate strategies include increasing pre-tax 401(k) or HSA contributions, adjusting your W-4 to fix over-withholding, and claiming the federal No Tax on Overtime deduction on your 1040 starting tax year 2025.

The Bottom Line

Overtime in Texas is taxed by the federal government only — federal income tax, 6.2% Social Security, and 1.45% Medicare. With no state income tax and no SDI, Texas workers keep significantly more of every OT dollar than workers in states like California, New York, or Oregon. Most Texas workers see a 15–28% effective tax rate on overtime, and the new federal No-Tax-on-Overtime deduction can reduce that further.

The fastest way to know exactly what you'll take home is to run your hours through the Texas Overtime Pay Calculator and apply the quick estimation method above.

Related Reading

• Is Overtime Taxed in California?
• Is Overtime Taxed in Florida?
• Texas Overtime Laws 2026
• No Tax on Overtime 2026 Guide
• California Overtime Pay Calculator

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*Sources: Texas Constitution Art. VIII, §24; Fair Labor Standards Act (29 USC §207); IRS Publication 15 and Publication 15-T; Social Security Administration 2026 Wage Base; Public Law 119-21; IRS Notice 2025-69; Texas Workforce Commission. Last reviewed June 16, 2026.*

Run your own numbers

With no Texas income tax, the overtime tax calculator covers the federal brackets and FICA that actually reduce your overtime check.